Dollar Strengthening as 3-Day U.S. Holiday Weekend Ends

January 21, 2014

U.S. markets will reopen following the MLK holiday, but activity will continue to be dampened by a big storm in the Northeast.

The dollar gained overnight by 0.7% against the kiwi, 0.5% relative to the yen, loonie and Swiss franc, and 0.3% versus the euro and Australian dollar.  The Canadian dollar weakened through the 1.1000 threshold.

The Chinese yuan is unchanged.  The People’s Bank of China made its largest liquidity injection in eleven months, depressing short-term interest rates that had been very elevated and lifting local equities by 1.0%.  Elsewhere in the Pacific Rim, share prices rose by 0.7% in Australia, 1.0% in Japan, 0.6% in New Zealand, 0.5% in Hong Kong, Indonesia and South Korea and 0.2% in India and Singapore.  In Europe, stocks are up 0.5% in Italy, 0.3% in France and Germany and 0.1% in Britain.

Ten-year sovereign debt yields have firmed by three basis points in the U.K., two bps in Japan and a single basis point in Germany.  Spanish auctions of 6-month and 1-year paper resulted in lower yields.

The WTI crude oil price firmed 0.3% to $94.63 per barrel, but the price of gold is 0.3% softer at $1297.80.

The ZEW Institute in Germany reported its January investor survey results.

  • The expectations index for Germany dipped marginally to 61.7 from 62.0 the month before but remained very buoyant.  The average reading in September-November was 52.3, and the long-term mean for this index is 24.4.  Moreover, current conditions are perceived to have improved to 41.2 in January from a reading of 32.4 in December, 28.7 in November and 8.6 at mid-2013.
  • Euroland’s investor expectations index climbed further to 73.3 in January from 68.3 in December, 62.0 in November and 30.6 at mid-2013.  Euroland’s current situation posted a less negative reading of minus 48.2 in January versus minus 54.4 in December and -79.5 at mid-2013.

House prices in the euro area rose 0.6% in the third quarter of 2013, trimming their on-year decline to 1.3% from 2.4% in the year to 2Q and 2.6% in the first quarter.  On-year house price changes in the latest reported quarter ranged from declines of 8.0% in Cyprus, 6.4% in Spain and 3.3% in the Netherlands to increases of 3.7% in Ireland, 0.9% in Finland and 0.7% in Belgium.

The Confederation of British Industries reported a disappointing industrial trends survey, where the January reading of negative 2 was at a three-month low, 14 points weaker than in December and well below analyst forecasts.

Consumer prices in New Zealand edged 0.1% higher on quarter in 4Q13 versus forecasts of a slight drop.  On-year CPI inflation rose to 1.6% from 1.4% in the third quarter and 0.7% in 2Q, and that is now comfortably within the central bank’s 1-3% target range again.  Indeed, the 1.6% rise from 4Q12 is the highest since the year to 1Q12.

Japanese supermarket sales were 0.8% lower in December than a year earlier.  The Bank of Japan began its two-day policy meeting on Tuesday, which is not expected to result in a change of settings.  Central banks in Turkey and Hungary will be making policy announcements later today.

Germany’s Constitutional Court is deliberating the legality under German law of the European Central Bank’s OMT facility, which thus far has not been used.

Swiss M3 money growth slowed to 7.6% in the year to December from 9.0% in November.  Dutch consumer confidence improved five points to a reading of minus 12 in December.

The French indices of leading and coincident economic indicators both edged up only 0.1% in November.  South Africa’s index of leading economic indicators slipped 0.2% in the same month.

Canada reports wholesale turnover and manufacturing sales and orders today.  Poland releases industrial output and producer prices.

Copyright 2014, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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